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Fraud*According to the Collins English Dictionary 10th Edition fraud can be defined as: "deceit, trickery, sharp practice, or breach of confidence, perpetrated for profit or to gain some unfair or dishonest advantage".[1] In the broadest sense, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation. Defrauding people or entities of money or valuables is a common purpose of fraud, but there have also been fraudulent "discoveries", e.g. in science, to gain prestige rather than immediate monetary gain*As defined in Wikipedia

Tuesday, May 25, 2010

3
COMMENTS:

Anonymous
said...

This helps you understand the concept:

Now let's talk about "naked credit instruments."

These are simply side bets that are entered into on the performance (or not) of a given security. That is, they're not really "naked short sales" as nothing is being counterfeited as is the case when someone sells stock or bonds naked short. The former is illegal - the latter is just pure gambling.

But here's the problem with these gambling contracts: When written by a regulated, government-backstopped bank, they are effectively counterfeiting money.

Why?

Because the sovereign is required to stand behind the institution in whole or part in some form or fashion. Whether this requirement is implicit or explicit so long as it exists the institution writing these naked credit instruments is in fact counterfeiting and uttering currency, as if the bet goes bad the government will be forced to either dip into the treasury to make the bet whole or borrow money in the markets and either give or lend it to the institution.

A claim to have money you don't have is in fact forgery - and again, as soon as you pass it to someone else, uttering.

This is the identical offense you commit when you pass a bad check. You write it knowing your account has insufficient funds to cover it and present it. That check is a credit instrument - when that promise to pay is not backed by actual money you have committed a crime.

But in your case when you utter a bad check the merchant eats it, as it bounces and is returned to them. When a bank utters a naked credit instrument without having the cash necessary to back it in full the government eats it when the bet goes bad.

This too is a fraud, and that Germany is actually going to start punishing people who commit fraud is one of those "duh" moments - or if you prefer, it's about damn time.

If you think this is not widespread, how do you rationalize that it was recently reported that Goldman Sachs never had a trading day loss in April yet its clients in eight out of ten cases lost money. Incompetence?

Stupidity? The Financial Times reports "The trading operations of Goldman Sachs and JPMorgan Chase made money every single business day in the first quarter ... Goldman's trading desk recorded a profit of at least $25m(£16.8) on each of the quarter's 63 working days, making more than $100m a day on 35 occasions, according to a regulatory filing issued on Monday ... JPMorgan also achieved a loss-free quarter in its trading unit - making an average of $118m a day, nearly $5m an hour". Morgan Stanley reported trading profits on a mere 93% of the first quarter trading days. This defies any sort of logic in freely trading markets, unless the markets are controlled and the game fixed. These are better odds than owning a casino.

The famous Barnum & Bailey carnival barkers used to snidely boast "there’s a sucker born every minute". The carnival games were notoriously fixed so the 'sucker' almost certainly lost. I’m not indicting anyone here (I will leave that to our alarmingly incompetent regulatory and enforcement agencies), but rather I’m only reinforcing why we have entered an age of public rage and why I felt compelled to write the Extend & Pretend series of articles.

RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS (RICO) ACT

Under RICO, a person who is a member of an enterprise that has committed any two of 35 crimes—27 federal crimes and 8 state crimes—within a 10-year period can be charged with racketeering. Racketeering activity includes:

In addition, the racketeer must forfeit all ill-gotten gains and interest in any business gained through a pattern of "racketeering activity." RICO also permits a private individual harmed by the actions of such an enterprise to file a civil suit; if successful, the individual can collect treble damages.

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